The China Securities Regulatory Commission (CSRC) officially launched the guidelines on application documents and prospectus of the Growth Enterprise Board (GEB) together with the CSRC Announcement  No. 19 today. From July 26, 2009 onwards, the CSRC will accept the applications for issuance on the GEB. The CSRC spokesman answered questions on the aforesaid issues in a press interview.
I. Please introduce briefly the opinion solicitation and improvement of the guidelines on application documents and prospectus of the GEB.
A: From July 3 to 17, 2009, the CSRC solicited public opinions on the “Contents and Format of Information Disclosure by Companies Publicly Issuing Securities No. X—Application Documents for IPO & Listing on the GEB (Draft for Comment)” and the “Contents and Format of Information Disclosure by Companies Publicly Issuing Securities No. X—GEB Companies’ Prospectuses (Draft for Comment)”. Also, the CSRC sought opinions from the market professionals via seminars. On July 8, we called a seminar on the two norms, with the attendance of all 68 sponsors. On July 15, we invited professionals with practical experience from 12 sponsors to scrutinize the verification of the key content of the norms.
During the opinion solicitation, we received a total of 23 feedbacks (22 emails and 1 fax). Generally, the positive public responses to the guidelines on application documents and prospectus of the GEB held that the two guidelines are feasible by absorbing the workable experience of the main board and emphasizing the GEB’s positioning and the start-up enterprises’ characteristics. After collating, summing up and studying the opinions and suggestions of all walks of life, we finalized the two guidelines upon modifications and improvements.
No suggestion on substantial modification towards the guideline for application documents was raised, so we only did some adjustments to the texts.
Concerning the guideline for prospectus, the feedbacks mainly involve such fields as the risk factors, services and technology, future development and planning. Upon research, we made key modifications to the 3 articles involved, with the modified guideline still containing 123 articles. The major modifications are as follows:
1. In the “Risk Factors” section, the following content is added: according to its actual condition, an issuer should describe in detail the risk that the technology will be replaced and that the controlling right may change due to decentralized equity, the low proportion of shares controlled by the actual controller or the agreement on equity among shareholders;
2. In the “Services and Technology” section, the following content is added: the innovation, uniqueness and continuous innovative mechanism of an issuer in its business should be disclosed; whether the core technology is in the category of original innovation, integrated innovation or re-innovation after absorbing advanced technologies from abroad should be disclosed;
3. In the “Future Development and Planning” section, the supplementation is as follows: an issuer is required to state that it will continuously announce the implementation of the planning and the realization of the goal in the periodical reports after its listing.
II. What is the requirement on the number of GEB issuers recommended by a sponsor?
A: In the initial stage of the GEB, the number of GEB issuers recommended by a sponsor will refer to the practice of the main board, namely, two representatives of sponsor will be responsible for the sponsorship of one GEB issuer. Before the securities of the GEB issuer recommended by a representative of sponsor are issued, the CSRC will temporarily not accept the securities issuance applications of other GEB issuers recommended by the very representative of sponsor.
At the initial stage of GEB operation, the regulation aims to ensure the quality of GEB-listed companies by encouraging the sponsors to recommend the enterprises according to the principle of “selecting the best”, thus preventing the overheated market risk caused by the excessive number of recommended enterprises. In future, the CSRC will decide whether to conduct proper adjustments to this regulation depending on the operation of the GEB market.
III. What are the regulations on the time limits of the financial materials contained in the application documents?
A: According to the “Interim Measures on Administration of Initial Public Offerings and Listings on the Growth Enterprise Board” and relevant guideline’s requirements, the reporting period of the financial material in the GEB application documents is the recent 3 full accounting years and 1 term. The validity period (from the submission day to the expiry day) of the accounting data of the recent 1 term in the prospectus and audit report shall not be less than 3 months.
IV. Could a company that has already applied for listing on the main board (including the small and medium board) switch to applying for IPO and listing on the GEB?
A: On the premise of complying with the GEB issuance conditions and the GEB market positioning, a company that has already applied for listing on the main board (including the small and medium board) may switch to applying for IPO and listing on the GEB. However, according to the relevant regulations of the “Rules of the China Securities Regulatory Commission for the Implementation Procedures for Administrative Licenses (Trial)”, a company should first withdraw its application for issuance on the main board, and follow the procedures for submitting the application documents of GEB issuance after implementing the procedure of discussions by the directorate meeting and the Shareholders’ Meeting and perfecting the application documents according to relevant GEB regulations. The CSRC will treat the switch-in applicants and the new applicants alike, with no special arrangement in handling, examination or verification.
V. What are the requirements on the sponsors?
A: The smooth operation of securities issuance on the GEB calls for the participation and hard work of all market participants. A sponsor, who recommends enterprises for the GEB, should complete the following tasks:
Firstly, according to such regulations as the “Administrative Measures on Sponsorship for Securities Issuance and Listing” and the “Contents and Format of Information Disclosure by Companies Publicly Issuing Securities No. 27—Sponsoring Letter and Report on Sponsoring”, a sponsor and its representatives should earnestly fulfill the due diligence and prudential verification duties, make sure that the recommended issuers comply to the market positioning and issuance conditions of the GEB, prudentially issue the sponsoring letters and the special opinions on the growth of issuers, and provide the report on sponsoring.
In issuing the special opinion on the growth of issuer, a sponsor should implement proper due diligence and internal verification procedures. The special opinion should have a clear conclusion, with ample and reasonable evidences. A sponsor should, from the perspective of practicality, formulate the complete evaluation criteria and internal audit system regarding the issuer’s growth and self-innovation.
Secondly, apart from strictly implementing such procedures as due diligence, mentoring, internal audit and recommendation, a sponsor should establish a complete work journal of the GEB project and working paper of sponsorship, ensure that its representatives and other relevant staff diligently perform their duties, and coordinate relevant work of the securities service agencies and their signatories participating in the stock issuance and listing. The CSRC will conduct spot inspection of the sponsors’ sponsorship for GEB.
Thirdly, according to the regulations on the GEB information disclosure content and format guideline, a sponsor should do a good job in the compilation and submission of the GEB issuers’ application documents and prospectuses. If the application materials seriously fall short of the requirements, the CSRC will take regulatory measures on the relevant sponsors and its representatives.
VI. How could a GEB-listed enterprise better demonstrate its market positioning and characteristics?
A: Most market participants hold that the GEB should stress the market positioning and sector characteristics by attracting enterprises in such industries as new energy, new materials, biomedicine, electronic information, environmental protection and energy-saving as well as modern services or rapidly-growing enterprises in other industries, and those highly-innovative ones in technology and business modes, those with good rankings in their respective industries and those with high market shares. The CSRC will pay close attention to such enterprises.
VII. What are the requirements on the disclosure of prospectus (application draft) in advance?
A: According to the administrative measures on GEB IPO, an issuer should, upon the acceptance of the application documents and prior to the examination by the public offering examination committee, disclose in advance the prospectus (application draft) on the CSRC’s website. The requirement, which aims to strengthen the public supervision, urged that the GEB issuers and sponsors enhance the responsibility and credit consciousness. A sponsor and a GEB issuer should, within 5 working days after replying to the CSRC’s issuance examination opinion and amending the application documents, disclose in advance the prospectus (application draft) and relevant attachments on the CSRC’s website.
VIII. How would the local people’s governments exercise their due roles?
A: In order to give full play to the functions of the local people’s governments in improving the listed companies’ quality, the CSRC will, after accepting the application documents from a GEB issuer, communicate with the people’s government at the provincial level in the place where the issuer is registered regarding the stock issuance of the issuer.
IX. Are there any special requirements on the stock issuance and underwriting of a GEB-listed enterprise?
A: The stock issuance and underwriting of any enterprise listed on the GEB should be in line with relevant regulations such as the “Administration Measures on Securities Issuance and Underwriting” and the “Guidance Opinions on Further Reforming and Improving New Share Issuance System”. A sponsor (lead underwriter) should do a good job in the stock issuance and underwriting for any GEB-listed enterprise according to the aforesaid regulations.